Mattel disappoints with second-quarter results, announces job cuts

(Reuters) - Mattel Inc’s (MAT.O) quarterly sales missed analysts’ estimates on Wednesday, weighed down by the absence of a big movie tie-in in the quarter, while the liquidation of key customer Toys ‘R’ Us continued to hurt the U.S. toy maker.

FILE PHOTO: Comic Con fans gather at the Mattel booth they participate in the opening preview night at Comic Con International in San Diego,California, U.S., July 19, 2017. REUTERS/Mike Blake/File Photo

Mattel shares fell nearly 9 percent to $14.88 in extended trading.

The company also said that it will cut 2,200 jobs, or 22 percent of its global non-manufacturing workforce, and plans to sell factories in Mexico, as part of a $650 million cost-saving program.

Mattel had a total of about 28,000 employees as of Dec. 31, 2017.

The company’s net sales fell 13.7 percent to $840.7 million in the second quarter ended June 30, short of the $851.8 million analysts had expected, according to Thomson Reuters I/B/E/S.

“We ... had a challenging second quarter driven primarily by the Toys “R” Us liquidation,” Mattel’s newly minted Chief Executive Officer Ynon Kreiz said in a statement.

Mattel said closure of the “Geoffrey the Giraffe” brand dented its gross sales by 10 percent in the reported quarter.

Kreiz, however, told Reuters he was optimistic that the company could recover lost sales from the defunct retailer, saying that he was in “deep conversations” with other retailers to fill the gap.

The Hot Wheels maker’s results paint a contrasting picture of how U.S. toy makers are dealing with the collapse of Toys ‘R’ Us, with rival Hasbro Inc (HAS.O) relying on sales of its toys based on big movie successes, Avengers: Infinity War and Black Panther to help it beat quarterly results estimates earlier this week.

Revenue from Mattel’s partner brands, which includes sales from toys based on movie franchisees fell 23 percent in the reported quarter.

“We had a one-off very big quarter last year because of Cars 3 which also skewed the results,” Kreiz said.

The fall in Mattel’s partner brands revenue also highlights Hasbro’s lead in obtaining lucrative Hollywood contracts to make toys based on blockbuster movies, at a time when kids increasingly prefer video games and mobile entertainment over traditional toys.

Kreiz who formerly led a media company said he would take a more hands-on approach with Mattel’s third-party toys, adding that it would be safe to assume that the company would add more movie franchises in the coming months.

Excluding certain items, the company recorded a loss of 56 cents per share, bigger than the 30 cents analysts had expected.